Question

On disSolution of a partnership firm, if realisation expenses are paid by the firm on behalf of a partner, then such expenses are debited to which of the following account:

• A. Realisation Account
• B. Partner’s Capital Account
• C. Partner’s Loan Account
• D. Bank Account

Hint:

Realisation expenses paid on behalf of a partner are treated as a reduction in the partner’s capital account balance, not as an expense of the firm.

Answer 1

The Correct Option is B

If a partner is responsible for bearing realisation expenses but the firm pays these expenses on the partner’s behalf, such expenses are debited to the Partner’s Capital Account. This is because the expenses represent an obligation of the partner that is settled by the firm, reducing the partner’s capital balance. 
Conclusion:When the firm pays realisation expenses on behalf of a partner, the amount is debited to the **Partner’s Capital Account**.